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16 Feb 2019
Ministry of Finance
Suggestion View - 247
Dealing with the economic slowdown

The global economy is expected to go through a bad patch in 2019 and may persist for some time.

The Singapore economy is likely to be badly affected.

Businesses will have to close down. Workers will be retrenched. How are they going to cope with their mortgage payments and living expenses?

Workers who have some savings for emergencies wil be able to cope. What about the others?

This is a problem with the capitalist system. It is a predatory system. When businesses conditions are bad, people have to sell their businesses and homes at a big loss. Those with money will take over these assets at low prices.

Is there an alternative to this predatory system? I like to share some ideas.

a) Businesses will have to go through cycles of ups and downs. When the economy is robust, people work harder. When the economy slows down, people should work less and take time for more leisure activities.

b) This approach is possible only if they do not have to meet heavy commitments, such as mortgage payments. One possible solution is to allow unemployed workers to borrow draw down a fixed monthly sum from the CPF savings/

c) If there is no savings in CPF, they should be allowed to withdraw from a state fund at a modest interest rate. They should be allowed to pledge their property as a collateral for the borrowings. The borrowings will have to be repaid at a future date, when they are employed. 

d) Businesses should also be allowed to borrow from a state fund to meet the regular operating expenses, e.g. to keep workers on the payroll. The workers can work on a shorter work week, with a proportionate cut in the pay. This is better than being unemployed.

Many countries operate an employment insurance scheme. It has certain drawbacks, but they provide a good safety net for workers for a limited period. My proposal is an alternative to this unemployment insurance scheme.

If we have a system to provide temporary funding to businesses and workers during an economic downturn, we can deal with the economic cycle as part of life, and the negative impact can be minimized.

Tan Kin Lian

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